Apple CEO Tim Cook reveals the new iPhone 12.
Apple is set to report its fiscal fourth quarter earnings after the bell on Thursday.
Here’s what Wall Street is expecting, according to Refinitiv consensus estimates:
- EPS: $0.70
- Revenue: $63.7 billion
- iPhone revenue: $27.93 billion
- Services revenue: $14.08 billion
- Other products revenue: $7.40 billion
- Mac revenue: $7.93 billion
- iPad revenue: $6.12 billion
- Gross margin: 38.1%
Investors will be looking to see if Apple offers guidance or a forecast for its first quarter in fiscal 2021, which ends in December.
Because Apple’s fourth quarter ends in September and the new phones only went on sale this month, any forecast would be the first clue from Apple about how robust it expects iPhone 12 sales to be.
Apple suspended its traditional guidance in February due to uncertainty created by the Covid-19 pandemic and hasn’t issued a forecast in the two quarters since.
“With only a week of new iPhone sales by the time earnings are reported on 10/29, we are unsure that AAPL will feel comfortable with guidance,” Deutsche Bank analyst Jeriel Ong noted this week.
The ongoing pandemic didn’t stop Apple from reporting blowout earnings for the quarter ending in June, which blew past analyst estimates and included double-digit growth in both the company’s products and services segments.
In particular, iPad and Mac sales were significantly higher than what Wall Street expected, which Apple attributed to strong work-from-home trends. Investors will be looking for data points from Apple CEO Tim Cook and Apple CFO Luca Maestri about whether Apple sees that trend continuing, and whether it will boost recently announced products, such as the $599 iPad Air that went on sale this month.
“Relative to the near-term, we envision limited near-term upside on iPhone volume estimates, but would not rule out upside in the upcoming quarter through sustained tailwinds from work-from-home/eLearning trends as well as Wearables sales,” JPM analyst Samik Chatterjee wrote last month.
A few weeks of Apple Watch Series 6 sales will also be included in Apple’s fourth quarter earnings. Apple introduced its new lineup of Apple Watches in September.
Investors are always paying close attention to Apple’s services business. Apple promised in 2017 to double annual services revenue by 2020, and said it hit its goal earlier this year.
Apple’s expanding services business is a big reason why Apple stock is up this year because it makes the iPhone maker look more like a software company, which generally have higher multiples than hardware makers.
But Apple’s services business has also encountered regulatory scrutiny in recent months and investors are looking for signs that it will continue to expand after years of strong growth. In July, Cook testified in front of the House Judiciary subcommittee on antitrust over its business practices surrounding the 30% fee it takes from apps and in-app purchases sold on the iPhone App Store.
More recently, a Department of Justice lawsuit highlighted a business arrangement in which Apple sells Google the privilege of being the default search engine on the iPhone’s browser, which it estimates is worth as much as $12 billion per year. Apple calls this licensing revenue, and it is now under threat as attorneys general from around the country call the arrangement anticompetitive.
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